JF1486: From One SFR To Owning 100+ Units in Just Three Years While Working Full Time with Powell Chee
Powell bought his first property in 2015, which was just a single family home that he rented out. In the 3 years since then, Powell has acquired some bigger deals, for a total of over 100 units. Oh yeah, he’s also been working full time during this time! If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Powell Chee Real Estate Background:
- Managing Partner for Platinum Equity Partners
- Has developed a specialization for investing in out-of-state multifamily properties
- Bought first SFR in 2015 then purchased two apartment buildings totaling 101 units
- Runs a meetup than grew to 500+ members
- Based in Redondo Beach, CA
- Say hi to him at https://www.platinumequitypartners.com/
- Best Ever Book: Miracle Morning by Hal Elrod
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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Powell Chee. How are you doing, Powell?
Powell Chee: I’m doing great, Joe. Happy to be here.
Joe Fairless: I’m glad that you’re happy to be here, and I’m happy that you’re happy to be here, and I’m also happy that you’re here. A little bit about Powell – he is the managing partner for Platinum Equity Partners. He has developed a specialization for investing in out of state multifamily properties. He bought his first single-family rental in 2017, really recently, but then purchased two apartment buildings totaling 101 units; I’m looking forward to hearing that story.
He runs a meetup that has grown to over 500 members, and based in Redondo Beach, California. With that being said, Powell, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Powell Chee: Sure, Joe. I probably should correct something – I bought my first single-family rental in 2015, so it wasn’t in 2017; I’ll get into that. But in 2013 is when I started raising money, really; that’s when I got involved with real estate. I was raising money for my brother’s private lending business in the San Francisco Bay Area. Soon after that, in 2013, private lending started to dry up in that area.
In 2015 I bought my first single-family rental, which was a single-family house in Kansas City, so that was out of state. From there, I quickly realized that I probably need to scale up a lot faster in order to reach my goals… So in 2017 I bought my first apartment building, which was in Indianapolis, and that was a 40-unit apartment building.
I bought that one primarily by myself, a little help from my dad, and then in 2018, earlier in January, I was able to purchase another 61-unit apartment building with me and four other investors. Currently that’s where I am; I’m looking to purchase another property, hopefully in the 100+ unit range. That’s where I am.
Joe Fairless: Wow. I am looking forward to diving in. Let’s see… Are you a full-time investor, or do you have a full-time job?
Powell Chee: I do have a full-time job, so this is all built around a full-time job.
Joe Fairless: And what industry are you in?
Powell Chee: I’m in corporate sales.
Joe Fairless: Okay, got it. So you said for the 40-unit you partnered with your dad, but it was mostly you. Was that income from your full-time job that you used to purchase the property?
Powell Chee: Yeah. It was all savings, and everything. I had a previous job, so I liquidated that 401K that I had, and instead of rolling it over, I just liquidated it and just used that as well.
Joe Fairless: Okay, cool. And then your first property was in 2015, a single-family rental, but you said you started raising money for your brother’s private lending business in ’13… What lessons did you learn from your experience in ’13 that you applied to your purchase in ’15?
Powell Chee: One of the lessons that I really learned right away was when I was raising private money I didn’t fully understand real estate as a whole back then, but I really just had to put myself out there… And sometimes, as you go through with things, you feel like you don’t really know everything and you sometimes feel like that should stop you, because you don’t know everything… But I really just felt like even though I don’t know as much, I know there’s a lot of people that I can ask questions and they can give me answers, but I can really hustle and really just meet a bunch of people that would be interested in the private lending business, and I was able to raise, I would say, from repeat investors and from some investors probably about 1.4 million during that time.
Joe Fairless: Wow.
Powell Chee: Yeah, so… It was pretty successful. And it was over multiple projects, so it wasn’t just a one-time raise of 1.4.
Joe Fairless: 1.4 is 1.4 million. That’s pretty impressive. Did you have a full-time job outside of that, or was that your focus at the time?
Powell Chee: Full-time job during that whole time. This whole time I’ve had a full-time job; I’ve always just had to work around it, and because my sales jobs have been flexible, I’ve been able to make phone calls and things when I need to answer things, send e-mails and things like that. So it’s always been built around a full-time job, and having that steady income.
Joe Fairless: How much was the purchase price for the 2015 single-family home?
Powell Chee: The purchase price on that was 92k. I bought it in all cash.
Joe Fairless: Why all cash?
Powell Chee: The way that I did it was I purchased it all cash so that I could refinance right away, because I thought it was gonna appraise for more than the purchase price for it, and I was — I don’t know if I was lucky, or if I did my right research, but I was right and it appraised for 132k. So really my loan on it was only 84k after it was all said and done.
So in essence, I only put it $8,000 into that property. I still have it today, and I love that little property, I love that little house… And for only $8,000 getting into it, it’s certainly pushed off a lot of cash.
Joe Fairless: The next purchase was a 40-unit that was two years later. How much was that?
Powell Chee: That purchase was $820,000 for 40 units.
Joe Fairless: And what type of business plan do you have on that?
Powell Chee: That one I had to purchase with a national bank. I know it’s a little unusual, I know a lot of times you wanna go with regional banks or smaller banks who may be more suited or better able to help you, but in my case, most of the regional banks, because I was an out of state buyer, were not really inclined to work with me… So I just used my local bank, which is a national bank, and they were willing to give me a mortgage on it and willing to help me purchase the property.
The thing is they did make it a short-term loan, so everything was good except for it was short-term. With that being said, I’ve been talking to them and they said as long as I can stabilize it within that two-year period, that they’ll be able to extend the loan. I’ll be looking to potentially refinance at that time, I would say. That’s what I’m thinking.
Joe Fairless: You live in California, this property is in Indiana… Please tell us about the management.
Powell Chee: That’s a huge piece of it. When you’re looking at a property out of state, when you’re doing your due diligence, a lot of what you’re doing is really finding out who’s gonna manage it… So it is a third-party property management that I’ve hired to run this. That was also part of the requirement from the lender, that it would be a third-party property management… Because it was my first time owning a property that size, and having somebody that is there on the ground, that is their primary profession – that gave them a lot more ease.
You do have to vet them. I vetted probably four different property managers, and went with the one that I felt the most comfortable with, and that worked with me the most, and that I thought was most fair, and it’s still going today. It’s been good.
Joe Fairless: It’s been about at least a year – how long has it been…? About a year and a half?
Powell Chee: A little over a year and a half, yeah. A little over a year and a half right now.
Joe Fairless: What metrics are you tracking on a consistent basis?
Powell Chee: On this building, one of the things that I wish I would have done better is that I would have raised more capital or had more capital available in the beginning for a lot of my cap-ex. Right now the building itself is doing okay; it’s actually just starting to turn around. About a year and a half right now it’s starting to turn around from pretty much breaking even to now starting to kick off a little bit of cashflow. Not a tremendous amount, not as much as I would have really hoped and wanted to get to, but it’s started to be positive, it’s starting to see the light.
So it’s taken me, like I said, a little more than a year and a half right now. Like I said, I wish I would have done it faster, but I certainly did learn a good lesson there.
Joe Fairless: What’s been the biggest challenge that you’ve come across from a management standpoint?
Powell Chee: I would say the biggest challenge has been a lot of the turnover that we’ve encountered. Trying to upgrade the class of tenant, I would say — it’s probably a C- class, in a C- class area, and we’re trying to just upgrade it a little bit to maybe a C class. There has been a lot of tenant turnover.
The previous owner was, I would say, not into upkeeping the property, so there had been a lot of deferred maintenance on the property. A lot of that is stuff that I’ve had to take care of, with both my property manager and outside contractors as well. That’s been a challenge. That’s primarily what eats up a lot of the cashflow all the time.
Joe Fairless: And with your management team, what are the fees that they charge?
Powell Chee: The fees that I’m charged right now are 8% as far as the management fee, but there’s no markup on any outside vendors, or — maintenance is all kept in-house, so it’s at a pretty reasonable price right now.
Joe Fairless: If you were to do one thing differently that we haven’t talked about about the 40-unit, what would you do differently?
Powell Chee: I think one thing — I know I already brought it up as far as making sure that I had enough cap-ex… I think that was really the main thing that I really needed to fix on this – I needed to make sure that I had more cap-ex available. It’s just making a property go really slow, and that’s been probably the major thing that’s kind held this property back a little bit.
Other than that, I think that the property is going well, it’s just taking some time to do that.
Joe Fairless: You’ve got a 61-unit building. Congratulations on that. You’re scaling rather quickly.
Powell Chee: Yeah, I was able to get a 61-unit also in Indianapolis. It’s probably about four miles away. That one was, again, something that I was really excited about. Actually, when I sent in my letter of intent and was trying to get it under contract, there was three parties and the owner went with a different party. But about three weeks later, I kept in contact with the broker and I just said “Hey, how’s that 61-unit property coming along? Is it gonna close?” and they said “You know what, it’s gonna fall out. So if you’re still interested, then I think that you would be the next in line.” And it all worked out; we were able to negotiate that contract really quickly, and then put that 61-unit under contract, and just kind of continuing from there. I’m really excited about it.
This is one that I purchased in January of this year, so I’m still in the stabilization phase of it right now. I would say it’s basically about breaking even, but really kind of having to stabilize the property. I had to go through a number of different evictions, some cap-ex that I did bring into this one that we’ve had to use for things like the roof, some exterior renovations and things like that…
Joe Fairless: Do you know why the first group who got selected did not purchase it?
Powell Chee: Truthfully, I don’t. This is probably something I should have asked… But no, at the time I was very excited because the purchase price that I actually offered in my letter of intent was higher than the person who declined at first, and when the seller came back, they said “Well, we’ll just do it at the price that we were gonna sell it at.”
Joe Fairless: Oh, wow…!
Powell Chee: Yeah.
Joe Fairless: You offered a higher price than the group that got selected, but then that group that got selected didn’t close.
Powell Chee: Correct. They didn’t close, and then the seller just said “We’ll just do it at the price that we had already negotiated with the other party.”
Joe Fairless: And what were the two prices?
Powell Chee: We ended up closing at $1,300,000, and my offer price that I offered was $1,320,000, so it was basically about a $20,000 difference.
Joe Fairless: Okay, cool. How much cap-ex did you budget for for this one?
Powell Chee: I budgeted 100k, so I brought in an extra $100,000.
Joe Fairless: And where did the majority of that go, or where is it going?
Powell Chee: Fixing the roof was a big thing, and that was about $60,000, renovations with that. There’s some landscaping and cleaning up of the property… There was a number of windows that were broken and had to be fixed, because you don’t wanna have broken windows… Things like that on the exterior, cleaning up some of the doorways, we painted a lot of the interior common areas, so painted and cleaned up, we’ve put in extra fixtures, and things like that. That’s where we are right now.
Joe Fairless: You’ve got 61 units, and a 40-unit. It sounds like they’re in the same submarket, since they’re a handful of miles away… What do you like about this submarket?
Powell Chee: That’s one thing — when you’re talking to the brokers, you’re talking to the property managers, it’s certainly a thing that you’re gonna wanna be aware of. This submarket happens to be in an area that’s up and coming in Indianapolis; it’s in the Irvington area, which is about four miles East of downtown Indianapolis. So it’s still at pretty much the core of Indianapolis, but Irvington is known as a very historic area, and it’s an area that is going through a lot of rehabs and renovations, a lot of new building and new businesses going on there, a lot of new restaurants and bars that have come in there…
So it’s kind of an exciting area to be in, and my building is right on the cusp of Irvington, in between downtown Indianapolis and Irvington, on a major corridor. Downtown Indianapolis is going through its major renovations, just like many other cities, of a lot of type A class properties, with a lot of millennials moving into there and wanting to be close to living downtown. My property is in-between downtown and Irvington, and really on the cusp of Irvington, so I think it’s a great area to be in; it’s just a nice area, where a lot of new things are coming up.
Joe Fairless: When you speak to the management company, one, what is that frequency, and then two, what type of reporting do you get from them?
Powell Chee: I have a scheduled call every two weeks with them… That’s a scheduled call, but I probably communicate with them twice a week outside of those. Generally, outside of those are maybe just something that I need to know from them, certain questions that I may have; I may send them a text or an e-mail to get some information that I would need from them.
Then the reporting, typically – I’m gonna get a cashflow statement, the cash-in/cash-out, I get rent roll, I get my P&L for the month, and then what I also do is I compile that P&L with a yearly P&L. Basically, I have each month – January, February, March, April, May… Through every month, the P&L side by side, so I can track how things are going maintenance-wise, whether that’s utility-wise, whether that’s income, whether that’s any sort of other expenses, anything that’s on the P&L that I can track month-to-month.
Joe Fairless: Your four business partners in that deal – how did you find them?
Powell Chee: Those are all friends and family. I guess if I pull back a little bit and look at what my overall strategy is, the first property, my first 40-unit, I really wanted to do it by myself; I really wanted to prove the model, and this is what I could do, and that it would work… I didn’t wanna bring in really anybody else’s money into this situation.
Then after I felt like I was comfortable, I felt it was working, I liked it and I could scale up, then I went out and purchased the 61-unit building, where I brought in four other investors. They’re all friends and family, so they’re all people that I’ve known from over a decade. Good friends and good family, people that had seen, I had told what I was doing, and they were interested in getting involved with my next one.
My future ones – now my strategy is to open this up a little bit more to not just friends and family, to actually go outside of friends and family and to acquire a larger property with more investors.
Joe Fairless: You’ve got a meetup that you run, 500+ members. How many people attend the meetings?
Powell Chee: I started in December, and the meetup has grown now, it’s over 600 people. The meetup itself has three different chapters, and each chapter has anywhere from 20 to 30, maybe 35 people that come to each meeting. They’re spread out through Los Angeles, because Los Angeles is a big area… So we spread them out, and we have good attendance; a mixture between people who are coming back for multiple times, and other ones that are just coming for the first time.
Joe Fairless: Do you attend all three?
Powell Chee: I don’t attend all three, although I’m into them. But right now I run the one that I run, and the leadership from all three – we meet basically once a month, we’ll go out to dinner and talk with each other how things are going, what we could do to help each other out, what’s been successful for us, and things like that.
We plan to have a big meetup maybe once or twice a year, where we’d invite some speakers to come in and talk to us, and just invite the whole meetup as a general, to come at one big event.
Joe Fairless: Did you create this?
Powell Chee: Yes, I created it. I started it in December. First it was just me doing my one meetup, and then about three months later I realized that there was certainly a need beyond just my one area in Los Angeles. There’s a lot of interest in other places.
Joe Fairless: What business results have you seen as a result of this?
Powell Chee: Just hard evidence-wise – there’s a lot of people that will either bring me a deal to look at, to either partner with them, there’ll be people that have asked me about hey, when’s my next time that I have a property, that they might wanna invest in, that they wanna take a look at… There’s a lot of opportunities like that that come about, but I just know that right now my network is much stronger than it’s ever been.
There’s just a lot more people that I’ve met through this, there’s a lot of people that are very interested, a lot of people that are very skilled, and one great thing is that I’ve met several people that I am potentially gonna partner with. I know one specifically that I’m partnering with right now to evaluate a lot of these bigger deals, and we’ve been working together really well right now. We haven’t closed the deal yet together, but I would say we’re gonna close something in the future.
Joe Fairless: Yeah, you’re not even a year old from the meetup standpoint. Nice work on that. With your overall time allocation or time management, how do you do these things while still having a full-time job?
Powell Chee: That’s tough. That’s a lot of waking up early and–
Joe Fairless: What time do you get up?
Powell Chee: I get up at about [5:30], do my morning routine, and then get down to the real estate and do as much as I can early in the morning. Then I’m at my job for most of the day, and then in the late afternoon till evening time – that’s when I’m picking up all the rest of the activities that I do throughout the day.
Joe Fairless: What is your best real estate investing advice ever?
Powell Chee: I was thinking about this, and think my best advice ever, Joe, is don’t reinvent the wheel. If you can model success with what others have done, I think that’s just really important. You don’t need to be so creative that you invent something new in this real estate world. Others did before you, and you can just model what they did, and then later on make adjustments as needed.
Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?
Powell Chee: Absolutely.
Joe Fairless: Alright. First, a quick word from our Best Ever partners.
Joe Fairless: Best ever book you’ve recently read?
Powell Chee: Best ever book I’ve recently read… Miracle Morning, by Hal Elrod.
Joe Fairless: You mentioned your morning routine and I was gonna ask you about it, but now I don’t think I need to. Do you follow the Miracle Morning?
Powell Chee: Yes, I follow that. I’ve been doing that for over 850 days, something like that.
Joe Fairless: Best ever deal that you’ve done so far?
Powell Chee: I would have to say my first deal; I was very happy with that one… The single-family house that I bought in 2015. I’m very happy with that.
Joe Fairless: How much is that 40-unit worth today?
Powell Chee: Truthfully, I don’t know… But if I had to guess, I would say it’s probably just under a million.
Joe Fairless: And you bought it for 820k. How much have you put into it?
Powell Chee: I’ve put in probably another 60k.
Joe Fairless: What’s a mistake you’ve made on a transaction?
Powell Chee: My biggest mistake was honestly not bringing enough capital. I hate to harp on that same thing, but just not bringing enough capital to that one was a big mistake.
Joe Fairless: What’s something you do differently to mitigate that from happening again as much as possible?
Powell Chee: Nowadays when I’m evaluating deals obviously I have a cap-ex budget that I put in there, but I always inflate it, just to make sure that — I’m very sensitive to that issue now of not having enough capital… Because you’ll budget for a roof, for it to be $60,000, but it may not be 60k by the time you get it done, so you need to inflate your cap-ex budget as you go into purchasing these properties.
Joe Fairless: Best ever way you like to give back?
Powell Chee: My meetup is free, so I hope I provide a lot of value to those people that are attendees at my meetup.
Joe Fairless: How can the Best Ever listeners learn more about what you’ve got going on?
Powell Chee: The best way is probably to just e-mail me. My e-mail is email@example.com. If people go to my website, I do have these 30-minute free calls where I just talk about anything involving real estate. It doesn’t have to be anything about me, it’s just a person guiding them through any situation… I’m happy to do those as well.
Joe Fairless: Powell, thank you for being on the show and talking about your single-family, the 40-unit and the 61-unit; really interesting, especially considering you’re in California and these properties are in Indianapolis… How you’ve set up the team, some lessons you’ve learned on them, and the numbers around each of them.
Thanks so much for being on the show. I hope you have a best ever day, and we’ll talk to you soon.
Powell Chee: Thanks, Joe. It was an absolute privilege to be on here.